China’s government bonds to get boost from strong economic data as possibility of fiscal stimulus, debt issuance decline

China’s 10-year government bond yield of 2.725 per cent is at its highest since May 9

The likelihood of Beijing launching additional fiscal stimulus has weakened for the rest of the year, providing a reprieve to the bond market, fund managers say

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China’s economy showed signs of bouncing back in the third quarter. Photo: AP Photo

Published: 1:36pm, 19 Oct 2023Updated: 3:26pm, 19 Oct 2023

China’s benchmark sovereign bond will probably halt a decline that has pushed its yield to a five-month high, as better-than-estimated economic figures reduce the likelihood of more fiscal stimulus that would increase debt supply.

China’s 10-year government bond yield stood at 2.725 per cent on Thursday, its highest level since May 9. The yield on the one-year government bond rose to 2.231 per cent, a level not seen since March 24.

The 4.9 per cent gross domestic product (GDP) growth rate in the third quarter along with resilient retail sales and industrial production data in September have put Beijing’s annual GDP target of about 5 per cent within reach. China needs 4.4 per cent growth in the fourth quarter to meet the full-year goal, according to the statistics bureau.

Global fund managers including Pinpoint Asset Management and Invesco say that the likelihood of Beijing launching additional fiscal supportive measures is declining for the rest of the year. That may provide a reprieve to the bond market that has endured sell-offs over the past two months amid a stabilisation in growth.

“The risk of a further upside on yields is controllable given the likelihood of no further ramp-up of fiscal policies,” said Liu Yu, an analyst at GF Securities in Shanghai. “The bond market is expected to recover in November.”